Can the Release of a Monetary Overhang Trigger Hyperinflation?

It is widely feared that, once prices are decontrolled in the formerly centrally-planned economies, households' release of previously accumulated money will trigger a hyperinflation. This paper finds, instead, that whether a country's fiscal, monetary, and labor market policies are destabilizing typically does not depend on the money stock. However, the release of a monetary overhang can precipitate a large initial real wage shock. To the extent such a shock is not feasible politically, there is a motive for monetary reform, which must be weighed against the cost of reduced public confidence in money.
Publication date: March 1992
ISBN: 9781451920956
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Inflation , Labor , wage , real wages , money stock

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